Financial Crime World

Compliance Risk Assessment Framework for Sierra Leone

======================================================

Sierra Leone’s high-risk political and economic situation, combined with a difficult business environment, poses significant challenges for corporate payment behavior. According to Coface, the country has a very high corporate default probability, making it essential for investors to consider these risks.

Business Climate Rating

Sierra Leone has a business climate rating of D, indicating a very difficult environment. The legal system makes debt collection unpredictable, and financial information is rarely available or often unreliable when it is. Intercompany transactions can be challenging in this highly risky environment.

Strengths

Natural Resources

  • Significant mining resources, including diamonds, gold, iron ore, aluminum, and tantalite
  • Agricultural sector: coffee, rice, cocoa, and palm oil production
  • Financial support from international institutions (IMF, World Bank, African Development Bank)

Weaknesses

Vulnerabilities

  • Weather conditions
  • High dependence on commodity prices
  • Corruption
  • Inadequate protection of property rights
  • Difficulty for small and medium-sized enterprises to access credit
  • Inadequate infrastructure
  • Failing health system
  • Risk of a renewed Ebola outbreak

Economic Outlook

Despite these challenges, Sierra Leone’s economy is expected to rebound in 2022 and 2023, driven by the mining and agricultural sectors. The resumption of investment in mining activities will support growth, as well as policies promoting private investment in agriculture.

Fiscal Deficit

Twin Deficits

  • Fiscal deficit narrowing due to higher mining revenues and fiscal consolidation efforts
  • Current account deficit expected to shrink thanks to the recovery in exports

2023 Elections

The 2023 elections are looming, with tensions between supporters of the ruling Sierra Leone People’s Party (SLPP) and the main opposition party, the All People’s Congress (APC), expected to increase. The SLPP does not have an absolute majority but can rely on support from independent MPs to carry out reforms.

Conclusion

A compliance risk assessment framework for Sierra Leone must take into account these challenges and opportunities in order to effectively manage risks and seize opportunities in this fragile political and social climate.